>> charlie: welcome to the program. we begin this evening with two editors from the "economist" magazine, john micklethwait and adrian wooldridge, talking about "the fourth revolution - the global race to reinvent the state." >> there's a more fundamental ideological value that's a set of sal use in the 21st century whether top-down audit contract values of the chinese state tore the liberal democratic values of the west, i think the west for its own values to triumph needs to reform democracy, needs to make it slightly less, as john calls it, less self-indulgent and dominated by self-interest groups, and i think by shrinking the state and making it more efficient and directed, there is more a chance for liberal democracy. >> charlie: we conclude with

stephen levitt and stephen dubner with their new book called "think like a freak." >> what i find is truly smart people, in my view, the smartest people are the ones who can explain what's going on in their thought processes. we're surrounded by people who are putitively really smart and you ask them why they're thinking and they try. but really smart people can explain it. >> one of the most important things is to say i don't know, to not think you have the answers. as an academic i don't know anything. ming mick, wooldridge, levitt and dubner when we continue.

>> there's a saying around here: you stand behind what you say. around here, we don't make excuses, we make commitments. and when you can't live up to them, you own up and make it right. some people think the kind of accountability that thrives on so many streets in this country has gone missing in the places where it's needed most. but i know you'll still find it, when you know where to look. captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> charlie: john micklethwait and adrian wooldridge are here. they are respectively the

"economist" magazine editor-in-chief and maggot editor. after their 2005 best seller "the right nation," they have written a new book, "the fourth revolution - the global race to reinvent the state." the current crisis of governance in the west, they argue are part of larger changes to nation states around the world. i am please to have had them at this table. welcome. >> great to see you again. >> charlie: what brought this book about? >> because of the job i do, you wander around the world seeing politicians very much doing the same things you do and you begin to detect something. in my case, i began to thrives a contest going on t on to reinvet government. what's interesting is throughout the west you will see elections. huge amount of people will get a vote from people in anger and fury. in america, there is apathy,

thinking politics is useful but it's never going to work and that explains a lot of the reason for the ratings, why the british touring party is going from 3 million to 20,000. and our book says, no, you should think about it. change is the most likely thing. you look at history, government has gone through gigantic changes, three revolutions and we're predicting a fourth one, but the second thing is because technology is not just history. you have to imagine the technology that transformed the private sector will eventually affect the public sector and we think that's beginning to happen. you take the two things, and government is under pressure, and as we say it is a global contest, and our worry is that america is a bit like sears, roebuck who, years ago, thought it was just battling montgomery ward. in fact, it was wal-mart and

beyond it amazon, and the worst kind of contest to be in is one where you don't know you're in a contest. america is slightly in that position. it isn't really aware of what's happening in asia, the focus on government out there. >> charlie: so what are the choices for america? >> well, i think the choice for america is to realize it is in a contest. america has had a very easy time of it in some ways. it's been the top nation for a long time, and i think it's become a li bit apathetic about government. the right tends to think the government is the bad thing, the state needs to be gotten rid of. the left thinks the government is a good thing, we should protect everything that's there, and i think you need to slim it and make it more effective. >> charlie: and there is paralysis. >> it's very hard to do. you have a situation in washington where everything has turned into an ideological battle and the solutions in the book are actually pragmatic. >> charlie: do you think

they're looking for new models? you look at state capitalism in china, are nations thinking that's better because they don't have democracy, they can have elections in certain areas of their country -- >> i think this contest matters, not just from the point of view of the general rule of history as we explain it is he who governs best wins. until the 16th century, it was china, which had the best government. then european states began to take over. what's really interesting about china today is they have a leadership academy that they sit down and scour the world and look for the best forms of government. you go there and feels a bit like harvard redesigned by dr. know. he has a huge red disk in the middle and ink well beside it. >> charlie: they're studying

in china the best governments around the world. >> they're not coming to washington. they're going to sweden and chile. these are the same people -- if you go to thatplace, ace did, you have to think this is the thing in shanghai 20 years ago when they were starting manufacturing. they were trying to imitate the west. but they're not impressed by your democracy. >> charlie: and they're less impressed by our economic model after what happened in 2008. >> that's true. they questioned your economic model, but compared it. some of it you have to discount. this book does not advocate the chinese system, there are lots of problems in their system. >> charlie: i find admirable the notion of let's find out what's working, a bit like a business school or the military in terms of training future leaders. i'm told that early on in

america, they try to spot the best athletes in all kind of sports and watch them grow. in china, they try to spot the smartest and brightest and get them on a track toward -- >> chinese civil servants, the elite level of civil servants, ambassadors, they're going to run state' owned countries. they're pushing their way up in the next generation to take over chieb. they have to get in by exam. there is an element of competition. every ten years the leadership changes. there are all sorts of problems with the chinese government. there is some sense of a system. >> charlie: title of the book is "the fourth revolution - the global race to reinvent the state." tell me what the first three revolutions were. >> the first is a revolution based on security. in the 16th and 17t 17th centuries, the state really beginning to exercise control over robber barrons,

various wars, and the monarchs say we're going to provide you with security. in the beginning to have the century, europe was a blood-soaked battlefield. the future to have the world looked as though it would be determined in china, looked as though it would be determined in india. there were three cities in europe which had a population of more than 300,000 people in. china, the heavenly city, alone had a population of 300,000 people. it had this incredible civil service selected from the whole of the population. so europe was a backwater. but by putting through the security revelation, by providing internal security, it began to create a sort of powerful civilization that people helped secure themselves but, at the same time, there was competition between european states for preeminence. china was a middle kingdom, european states are also looking

outward. when china invents gunpowder it's used to fire, when europeans invent it, it may not be a good thing. but it's power abroad. security and power in the hands of the united states. the second revolution is the rise of liberalism. obviously in the french revolution at the american revolution. but the example we focus on is what happens in britain, the most powerful country in the world, the america of its day. partly because britain is rather in a daze in the sense that state in the 18th centuries became a bit of a parasite and the british liberals managed to restrict the size of the state, get rid of lots of irrelevant offices. they actually cut public spending on government. taxation goes down from 18 million a year in 1815 to

16 million a year in 1846. they open civil service to talent and provide more efficient public services by putting liberty and efficiency at the heart of the state, you get this second revolution. but as the 19th century wears on, people begin to worry that the state is not quite doing enough, not helping the poor enough, you don't have a security system for old age and that lays the foundation for the third revolution, the rise of the welfare state which dominated much of the 21s 21st century. >> charlie: where are reagan and thatcher? >> we argued after the first two that the state has gotten too big, running lots of things it shouldn't be. in the 1960s, everything the state touches from the war in vietnam to crime and poverty begins to fail. reagan and thatcher get the

state out of running lots of industries which it shouldn't be running, they control the trade unions which have become a huge problem particularly in britain, but we argue this is only a half revolution because the growth of the state rapidly resumes in the 1990s. so, you know, george bush expanded government even faster than l.b.j., regulations are multiplied and now we have a bigger state than in the 1980s. so what they did is important but we still have a big problem which is why we thought there's a fourth revolution needed and underway. >> charlie: you want to say something about a second revolution? >> if i was a republican in congress my hero would be british liberals. they reduced the size of the state. they increased services. they were building schools, hospitals, the population went up by 50% but they reduced the

state. >> charlie: how? got rid of the cronyism. in america, you could do the same. $1.3 trillion of tax breaks, very few which goes to the poor. >> charlie: corporate cronyism. >> some of it on the left, some of the right but there's an inability to tackle it. there has to be something wrong with the state and the left should really look at this. >> charlie: is there a model on the planet which has closer to the best working system that provides both a very strong economic engine, at the same time a kind of social welfare system that makes sure that those disadvantaged among us do not fall below a certain level? >> the place where most people and the chinese model cares for the poor.

it's very difficult. it's hard to find any part of the american government that's half as efficient. they have a much smaller government than america and that's applies to britain as well. >> charlie: the man who fashioned this is very authoritarian. >> and look at sweden, was a country which got bigger and bigger government and faced the prospect and brought it down, reduced the state from 75% of gdp to 50%, and is heading down. it did it by saying things like they like education vouchers. they don't care who provides education. milton freedman would look at sweden and think that's the place. who would ever have thought that? sweden and chile is interesting. it's not washington is bad but look at crime, what happened in new york, lots of people look at that. >> charlie: bring it back, this is the great debate in the united states. you know, it is the debate

between how do you lower taxes and -- or raise taxes or lower taxes and, at the same time, a hard look at entitlements and -- >> i think that's exactly -- >> charlie: -- and raising revenue. >> that's exactly what we need. and the problem with america is you have such an entirely ideologically polerrized system you can't get to any agreements in any practical measure. >> charlie: they don't trust each other. >> they don't. and an interesting example, what happened in sweden, they hit the big government in 1993 and collectively decided they've got to look for pragmatic solutions, taking ideas from the left, taking ideas from th the right,t putting a balanced budget at the heart, fibbing long-term entitlements. is it possible for a democratic country to do it? very hard given the state of washington in the moment. >> the interesting thing about sweden is they handed over some of the problems. they said, we have to deal with the pension problem. a committee of wise men fix it and we will back it. america went with various

commissions but never prepared to back it. europe is in a worse mess, a complete catharsis when europe goes to the polls. perhaps a third, maybe more of the parliament will be people who have no interest in the european union working. but the telling thing was from the primary of luxumburg who made the famous statement, he said, we all know what to do, we just don't know how we would get elected if we did it. >> charlie: are you two going to come out and say maybe democracy is not all it's cracked up to be. >> we remain strong believers in democracy but it's gotten at go. >> charlie: what is tatty? threadbear.

>> charlie: there's no purpose other than remaining in power. >> democracy, two british people here, we always have to quote church hill. the quote about democracy being if worth of all systems except for the rest. it does work in terms of having some degree of ability to change in the long term and what's happening i think is there's a fundamental debate, behind all the tech n techno contractcrati- >> charlie: to be more transparent? >> yes. there's a great contest of power, economic dominance, whether the america under the western system is the most powerful in the world or whether the chinese one is the most powerful. but there is even a more fundamental debate going on which is which values should

triumph, liberalism and democracy or top-down aw auto a. there's a more fundamental ideological battle to see which set of values win in the 21s 21st century, whether the sort of top-down autocratic value of the chinese or the liberal values of the west. i think the west for its own values to triumph needs to reform democracy and make it slightly less self-indulgent and less run by self-interest groups and by making it more directed, there's a real chance of liberal democracy. >> charlie: do you agree with that? >> i do. but i also think challenges in the west are from both right and left. it's very easy when you say you want to shrink the state, which

we think you do, that is the argument for liberty because we think the state is too intrusive. it's' gotten too intrusive because both left and right have kept on asking for more. you look at the wait the state has grown in the past 100 years. it's one thing that's the constant of every single american, the state has kept on growing throughout the entire period and the reason part she the left wants to have schools and hospitals but the right wants to have prisons and bigger armies and they both create rules. if you are not in a system where in order to become a hair dresser in florida you have to study for two years, if you want to become an interior designer you have to study two years. t whatever the wildest dreams, it wasn't to stop people having clashing color schemes. the state is far too big. >> charlie: do you think the state needs a regulatory necessity? >> i think the state should be the regulation of choice but do you really want it to work out

whether someone can cut your hair or not? there is no need for this. it's the drowning frogs. it's gradually taking more and more and more. some things i have pointed out but many others haven't and what we think is a smaller state which did things better would be much more focused because a lot of things the state is set up to do, it doesn't. why does america spend more money giving mortgage tax relief to people, the top 2% than the entire 50% -- the bottom 50% gets through social housing? there's no way that is a sensible housing policy. >> charlie: does the chinese system, whatever they call it, does it in any way inhibit creativity, inhibit innovation, inhibit a freedom of thought that might lead to innovation which might lead to

technological advances which might lead to scientific advancement? >> i think the worst thing to do in the world is to underestimate your opponent, your challenger and i think it would be very foolish to underestimate china. what they've achieved is incredible and they're continuing to achieve an amazing amount. but basically what they have been doing is capture growth. they have been looking at the best continents in the world and now the best governments in the world and imitating them and ultimately you can't have a creative innovative economy if you don't have freedom of thought and freedom of debate. i think there's an inherent contradiction in what they would like to do. in singapore, they had a sign that said be more creative, and in a sense they want top-down innovation but it can't work. >> charlie: as the end of the day, it's also about power and people do what they want to do

in order to maintain power and if they think clamping down, whether turkey, china or any other place on any other continent, if, in fact, remaining in power or having access to power demands that you do things that you might not think are otherwise appropriate, you will do it. >> but it's not traditional awen autocracy china. it keeps rotating every ten years and getting younger whereas traditionally in india they would be getting older. >> charlie: this question was raise where did you say look at india and china both with double-digit growth rates, who is going to come off better in the end and bet mr. the short-term? >> we have to be honest and say if you were a poor indian or poor chinese, over the past 20 years, you probably would have done better. what happened in china and

india, it's been much less efficient and improving the basics of life, but i think the indian system, especially under modey, there is an ability to change things. dk de mock si gives you that ability. in china, you have to remember basic things, the level of inequality. we had someone in roll call earlier pointing out the top wealthiest people in congress is 1.6 billion. the wealthiest in china is 98 billion and that doesn't include the unlisted wealth of people in leadership. and there's cronyism in china, a vast amount, so it's not perfect, but it is for the first time taking ton west. >> charlie: it has always been my impression, not based on a study, that one of the things that must lead to revolution and protest, whether it is in the

arab world or whether it's in asia, whether it's in latin america, it is the sense that the system is not fair, and the fact that there is an inequality in the system is the most likely thing to cause people to march. >> i think it's a big deal throughout society. in china it's a huge deal and there you see a middle class emerging. you look at the welfare system, look at the complaints on welfare. it's about things like people can't get their children in the right school and somebody's found the way around the system, hospital is the same thing. to be honest, the first problem is the economy. the second problem is some version of -- >> charlie: i hear this as i travel around the world, a sense that somehow everybody was too quick to write about the decline of america, that somehow there are cohesive forces at work. notwithstanding the governmental

issues essential to change that give america the real capacity to do much better in the 21s 21st century than expected? >> people often say that, well, you shouldn't be so worried about china because if you look at japan in the '70s, everybody was terribly worried about japan and everyone said it would take over the wealth of the world and it never happened. america looked at japan and learned at its success. it looked at management and manufacturing and the production system and realized there was a threat and they could learn from the japanese. >> charlie: even the auto industry. >> yes, and we have to do the same thing with china, look at what it's doing that's well. >> charlie: and make a commitment and do it. >> what they've done through their infrastructure is important. we need as john started off by

saying we're engaged in a competition and we need to understand how well our competitors are doing and what weaknesses in our own system points r pointed out. so america is an incredibly adaptable and successful system but only remains that way if it's not self-indulgent. >> charlie: who is the one leader you've seen in these travels that somehow represents not so much in terms of the structure but grasping the essential questions that you're raising in this book? >> one interesting anecdote is my meeting was delayed. it was four days after. the chinese see him very much as the person who set up a system.

we have substantial disgleams but his version of when he looks at the west he talks abit being the all you can eat buffet that we've set up a state which gives people license to keep policing. you william like awe -- you become like augustus in charlie and the chocolate factory, you ask for more and more and more. he understood that possibly earlier. >> charlie: one more apology for personal reference. i probably have done more interviews with him than any single individual and one of the stories he has told me more than once is the relationship -- who do you admire the most? and he said son shaupang. >> his method is one we'd like to follow with chinese caveats and phrases behind it. that was key because the mixture

of efficiency and growth and authoritarianism? it is also politics and politics demand leadership of a special kind and that also was essential. >> absolutely. i think we have been lacking that. the politicians have not been -- as john said, they don't feel they can do the right thing and get reelected. at some point you have to put short-term considerations bind and say, look, the retirement system is going broke. we can fix it, but it's going in the wrong direction. we need to take government seriously. i think one of the problems with america is the right tends to think government is a bad thing, we want to get rid of it which is, obviously, foolish. but the left thinks government is a good thing, helping the poor and we want to protect it as it is. it needs to be reinvented. that doesn't mean getting rid of it but bringing it into the

21st century rather than leaving it as it quite often is in the 20th and even in 19t 19th century in some ways. >> charlie: you ask me about what is the most impressive leader on the global stage at the moment. herangela merkel has been effict in terms of hanging on to power inside germany. certainly the most powerful figure in europe by a long way. all the other leaders defer to her on the main issues. and she is a very, very good politician, better than anyone else at the moment. somethink clinton was better than anyone else. but when we judge her in 20 or 30 years, we might sit and say here was this woman who had enormous power but didn't fundamentally force europe to change. she analyzed the problem correctly, saying why does --

she knows exactly what the problem is but is ginger about going through it and sometimes you need a thatcher. >> charlie: but she wants to stay in power. >> but in the end, legacy matters. i think when barack obama looks back at his time, he will seriously think why on the earth did he not accept the recommendations to have the commissions -- recommendations of the commissions. you ca>> sweden is a an examplef staying in power when you do this right thing in. the early '90s, they changed their system. they hadder are radical reforms, which meant challenging the basic assumptions of how the welfare state worked and they did this and got huge rewards because everybody realized this is absolutely a bold set of reforms and all of the

revolutions we have been talking about actually, in the end, you know, get rewarded. >> charlie: on top of the fact that people are sometimes scared of voters, it seems to me time after time voters respond to leadership and they respond to what they believe is conviction. >> cameron could go down as someone who achieved a great deal. he came and reduced the deficit quite a long way. he also pushed through the school reforms pretty much along the lines that we've talked about. he angled healthcare reforms and his welfare ones aren't quite established. but there's an element, people liked him in the beginning when he seemed to be making decisions and moving ahead. >> charlie: if you had to make a judgment today about barack obama, tell me how you would write the first paragraph. >> my first paragraph would be one of enormous promise, an enormous hope and a real capacity to unit the american -- unite the american people under

a divisive period under george bush and someone who fluffed that opportunity from the left by having rhetoric which inflamed people's sentiments. he was up against a very different republican party and i think that's true but i think the capacity to take on big domestic issues such as entitlements i think is a reasonable approach to that and he didn't really do it, i think. >> i should say, i'm an editor who's endorsed him twice. maybe a function of who he was running against. but the other bit i would say is foreign policy. >> charlie: proved himself. he's proved himself by getting some things through, some are muddled, you've seen obamacare and dodd-frank. the big thing we covered, what would america fight for, in that

particular case, that was a real thing. that was me going around and seeing america, talking the the japanese and the gulf and israel, and these are all relying on america to come and fight. if america abandons that presumption, actually, it's really costly. and obama, the other thing which may haunt him is, by the end of his presidency, you would expect, you would have hoped he would have brought in the emerging powers into the world order, china, indonesia, india, and that's still very unformed, i think. he fundamentally has not put enough effort into it. >> charlie: the question i have, and i don't know the answer to this, but i think i do, i think they believe that the country is not that concerned about foreign policy and these great battles that are going on around the world and are less concerned about them.

they don't have popular support. part of that is two with wars that sapped both humans as well as treasury. >> this is absolutely true as analysis. there was a huge appetite for focusing on domestic reform and also a huge appetite for centrism, for bringing together the left and the right. the ideological solutions. but he contracted far too much of the detail of the decision making to congress and the liberals in the congress. he didn't appeal above the heads of the national interest groups and i think he missed a real opportunity to be a centrist government. if you looked at this entitlement issue, america's entitlement problems, they're not solvable, they're not dramatically huge. if he looked at those, at pension and retirement ages, he could have carved out a position as a very far-reaching figure

and i think, far too much, he's drifted to the left or listed too intently to interest groups within his own party. >> charlie: thank you. great to see you. thank you, john. good to see you again. >> good to see you. >> charlie: the book is called "the fourth revolution - the global race to reinvent the state." back in a moment. stay with us. >> charlie: stephen levitt and stephen dubner are here, their 2005 book freakonomics, "think like a freak," to offer insight on human behavior yore. they found a franchising company, radio, books, and a document ririelum. their book offers advice on thinking more productively and creatively, "think like a freak." i'm pleased to have stephen levitt and stephen dubner at the taifnlt well com gladwell said

"in many moments stephen levitt asked a question, who is the fool, kids or adults? the obviously answer is kids. the cliche is taking candy from a baby, not a grown-up man. but instead of accepting conventional wisdom, the two sat down with alec stone, somebody in the business of fooling people, and ask him what he thinks, and his answer, adults. the point i read that, it is the way you guys think. it is unconventional thinking, and let's test whatever hypothesis we have. am i right? >> you're right. go seek data. don't accept what other people say and have fun doing it. >> charlie: that's a good life, isn't it? >> we're lucky. >> charlie: and then make it into a book and movie and radio show and internet and a document ri. >> ad nauseam. >> charlie: what does it mean to ask the question you have been asked at every stop to think like a freak? >> the only good answer is it

took us to long to say it that we had to write a book about it. it's not complicated. i think get rid of the preconceptions is the biggest thing. thing. let me go back to the magic thing. i learned so much about how kids and adults think. we had alec stone, the magician, come in to our radio show and put on a magic show for kids and adults to see how this worked in person. a simple magician's trick, a magician will say, charlie, i want you to look at this handkerchief. what all adults do, we do what's called pay attention. it means focus everything on the one thing we're encouraged to. so we're very vulnerable to misdirection. that's what a magician is doing, whether it's a magician or politician who wants to misdirect, we take the bait.

some kids look down here and say, hey, why are you putting your hand in your pocket? so to think about a child is to think about what turns you on and not worry about whether you're in flow with everybody, not to sound smart and sophisticated but to come up with ways -- >> charlie: so see where curiosity takes you. >> we've had the good fortune to grow up and get older without losing a childish thing, which isn't always good but sometimes it is. >> charlie: it's the secret of my success, whatever there is. >> well, you get to ask any question you want of the most brilliant people in the world, what's wrong with that. >> charlie: exactly. the perfect question, what's wrong with this? and have them tell you. and people love to try to answer your questions because they feel flattered that you would ask them. >> about anything. i remember when i first started in journalism, it felt like the biggest racket.

the only tool i need is a notebook and you could walk up and ask people things you would never get away with in normal circumstances and they answer you. it's nice work if you can get it. >> one of the things i learned as an academic trying to find data, if you show the slightest interest in anyone, they'll give you whatever data you want. you can't possibly think how they can think it's in the best interest but since you're the first to engage them, they will do whatever they can. >> leavitt is very smart. i'm slightly above average. he doesn't have to prove it. he's just sitting there. i find truly smart people, in my view, the smartest people are the ones who can explain what's going on in their thought processes. we're surrounded by people who say they're smart and they really tease it out and have

these ideas. if you ask the smart people, they can walk you through, show the theory, show the data, tell story. >> charlie: two people really good at that is warren buffet. and the other is nathan merbol who. >> and clinton was good as that. >> charlie: obama called him the great explainer. is there's a sense of respect for whoever differs with bookline. he says, i fun you think that way but if you think the world is round like i do -- (laughter) what else to think like a freak? >> one of the most important things is to say i don't know. as an academic, my premise as a colleague is i don't know anything. you spend six months or a year

on the project because you don't know what the answers are. but in the world of punditry and business, it's a horrible failure to admit you don't know the answer ahead of time. >> charlie: in earlier conversations, we talked about the questions have power because if you ask the wrong question, you don't get the right answer, and if you ask the right question, you're on your way to getting the right answer. almost halfway there. >> we chuckle at the crazy questions that kids scrks but we get conditioned out of asking the most outlandish questions, most of us do. so, you know, especially in a public setting, business setting in politics, nobody wants to be the person at the table who says, you know, i know you all think we should zig, but have you ever thought of zagging for a minute? the biggest innovations in society are not produced by consensus in corporations or

government, it's a guy or two or three or gals in a garage willing to ask those questions. that is the story over and over again. >> charlie: frequently, the question is why not. >> yeah, why not is -- look, we write a lot about incentives. the why not is -- i want to protect -- it's a lot more attractive to protect your reputation as a safe, nice, reliable, responsible, relatively intelligent person. we tell this story in "think like a freak" about penalty kicks in soccer and the data show 75% of all penalty kicks at the elite level are successful. that's a high rate. if you want to improve, you think what could i do. turns out almost every kicker in almost all circumstances kiko the corn -- kick to the corner where the goalie has to jump. so if you look at the data, you see he jumps to the kicker's strong side a little less than 60% of the time to the right, 2%

of the time in the middle. what if you do kick it dead in the middle? it's ridiculous because that's where he's standing but you look at the data, you're 7 percentage points more likely to score if you kick it in the center. we said why don't more people do it? the reason they don't is if he happens to stop it you look like a fool. that's a metaphor for life. you can take the risk of your personal reputation if the gain is greater -- nobody will think you're stupid. >> you said why don't people ask the right questions. i have a little company and we meet with clients. they'll say something incredibly brilliant. the client doesn't give them credit at all.

>> charlie: because it comes from them. >> i say the exact same thing ten minutes later and people think, oh, my god, it's a genius at work. i've come more and more to appreciate the luxury that dubner and i have as being experts. it gives us the ability to say stuff that's not that smart but people treat it like it's smart. it's actually hard if you're a middle manager in a company to say things that are unusual because people don't start with the presently us of, oh, this guy is saying something brilliant. it's interesting. i think we lose sight of that because people are so nice to us, much nicer than they should be. >> charlie: what's interesting is people are sitting at home watching this and other programs and they're saying this is so basic, fundamental common sense. >> right. >> charlie: these guys have made millions of dollars by telling me what i already know. >> i think for us, even, it was emupbaembarrassing.

we thought maybe there was magic we did. there's no magic at all, the more we thought about it. finally, at the end, we thought we better make it clear to people on page one there's no magic here. but what's amazing is it's so hard even for us to have to follow a common sense course. just -- >> charlie: i'm also interested in the capacity of how individuals delude themselves and, b, do things, as you suggested, because you don't want to be embarrassed. >> right. >> charlie: i find people who really do break through, one, they don't give a damn about being embarrassed. >> honestly, i know you don't like me talking you up so much, but one thing about levitt that made his research so valuable and i try to learn from him is if you can learn your way to not

caring, man, is that great. it's the corollary of when people teach you to not be scared of the unknown in some way. if you can pull that off, that is a huge benefit because it's opportunity costs. all the energy that goes into caring what people think, those are hours and brain cells that go into doing something for real. but it's hard. >> charlie: what about bias? it's in all of us everywhere. the smartest people tend to have the most of it. >> charlie: really. that's what the research seems to show. it's called the cultural cognition projects. it's worth looking at. turns out if you look at an issue like climate change or nuclear power or whatever, the most educated and well-read people tend to hold the most extreme views on one side or the other, the mechanism being smart people seem to be good at seeking out confirmeddatory evidence of their existing

beliefs. scary thought. >> charlie: it's true, also, people listen to talk radio. that simply is a reflection of what they already believe. they don't listen to somebody who's way apart from who they are. they want to hear somebody say exactly what they believe. >> oh, yeah. you don't like to read terrible reviews of the thing that you love. >> charlie: exactly. like your own book. >> charlie: does all you know, is it at the core of the way you live your life? >> oh, yeah, absolutely. i mean, being an economist -- essentially i am an economist all the way through -- but i think the book describes us. >> you very much. , too. i'm a hybrid, but you very much. >> charlie: how do you work together?

>> carefully... it's actually really easy. is true at the beginning of every book we brainstorm and throw out many, many ideas. but he's in chicago, i'm in new york. email, phone, that's the way. i have to say, my proudest moment of all came this morning. i thought of levitt. my son is 13 and follows the soccer. in europe, he bought a juan jersey and came up to me this morning, solomon did, and said, you know what, dad? ever since i bought that jersey, juan mata has been doing crazy scoring goals, like six goals in five games and before i had been very cold. i said, obviously, you are buying the jeers y. he said, dad, causation does not

equal -- (laughter) >> it may be too lat late for m, but him. he's a 13. it's a happy day. >> charlie: what is the impact of this extraordinary onslaught of data that we have? it affects everything people do. they can have sensors. they can tell you exponentially more than i've ever known before. >> so my belief, i think our shared belief is every important problem in the history of mankind we've solved has been solved through technology and big data is potentially an opportunity to solve a lot of problems. although i have to say i'm a big data skeptic. so what you're describing is essentially different, but when i think about the big data out there in terms of companies and whatnot, i think it would be hard for anyone to find out what to do with it. people will give you examples of how they will be able to tell you, you know, you will be driving by someplace where you wanted to do your dry-cleaning

and they'll tell you to remember it, but i think in practice a lot of it is just a myth that what's missing, i think, is the kind of ideas and good questions and talent to take that data and turn it into something, that's a really scarce resource. it used to be data that's scarce resource, now the talent to understand the data is a scarce resource. we're a long way of having the abundance of talent to turn it into reality. >> what makes you think we're not there yet? if the field is new, you just haven't developed the talent, that it will be here in five years and people start to study. >> yes, i think the idea is there. we work with companies and they think it's there -- >> charlie: maybe in the numbers. >> it's just a logistical problem of trying to handle theda at that. for many companies it's an obstruction. >> charlie: when people come to you and say, listen, i'm happy about the data i have and how you analyze the data and you can look at the numbers and tell

me things that make me see everything in a different light. however, i constantly have found that my intuition is often right and that what might have seemed the right course for me through some other process was a better course. is that a contradiction or not? >> no, my view of intuition and data are they both inform what you should do. >> charlie: so there is a place for intuition. >> absolutely. >> charlie: you can't define but you can know. >> intuition is telling you where to look. in a world in which you have so much data you can't possibly look at it all, and i think the really -- the really impressive, creative, artistic, scientific type of people, what their ability is, to figure out where to look when it's not at all obvious ahead of time. >> charlie: i know -- i mean, i just don't quite understand

when you have people constantly talk about it it. first of all, it's relevant in terms of if you believe and passion and all that are factors in accomplishment. >> right. >> charlie: well, you know, a and lot of that is people can overcome the norm and the predicted because somehow they bring to bear a lot of it. tell me i'm wrong. maybe you don't believe in this at all. >> no, i do. i think the challenge is people declare for political parties or sides of the aisle, there are people who declare i'm going to put my faith in data and statistics and a rational way of thinking or put my faith in an intuitive totally natural way of thinking. and i think that either of them are independently wrong, and i think you see in the political debate now, like from the outside, any of us can look at how politicians are operating now and it's hard to blame them. the incentives, we give them the incentives to do so, but you see

there's a total absence of bringing together the two important parts you want which is wha what do the data suggeste do and how to used intuition and good judgment and adjustment of how humans wants to behave? kind of like you're saying about the stuff we write, doesn't seem hard but plainly it is. >> charlie: i also believe intuition is fed by a whole series of experiences which is data. >> that's one advantage that older people have over younger people because younger -- you know, younger brains are very plastic and sharp but we do have wisdom and experience. >> charlie: what might you guys have done if we hadn't come together? be an economist? >> be living in a shack, writing my 18th book no one would have read. >> charlie: instead you have rivals -- >> no, but i have property. >> charlie: thanks so much for

joining us. >> thanks for having us. >> charlie: where do you think the freakonomics empire goes? >> we know where it's going, golf. >> charlie: and what are you going to tell us? >> we are going to tell you how to think your way around the golf course, how to use freakonomics thinking to lower your scores, if that's what you want to do, and we are engaged in a massive field experiment of trying to see how to optimally practice at golf and whether we can turn really bad amateurs into somewhat bad amateurs and pretty good amateurs into better ones. >> charlie: stephen levitt and stephen dubner, thank you. >> our pleasure. >> charlie: book is called "think like a freak." captioning sponsored by rose communications

captioned by media access group at wgbh access.wgbh.org

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